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Analysis and Prediction:

Date of publication: March 18, 2019 | Author: Tim Clayton

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Last Week’s Summary

World Economic News Review


Retail sales rebounded for January, although December’s very weak data was revised even lower while durable goods orders were mixed.

There was a weaker than expected reading for a New York manufacturing survey and industrial output was significantly weaker than expected.

Inflation data was benign with the headline CPI data reading of 1.5% from 1.6% previously and the lowest reading for over two years while the core rate was 2.1%.

The data overall maintained expectations that the Federal Reserve could be very patient on monetary policy and would not increase interest rates again in the short term.

Fed officials made no comments on policy with the blackout period in force ahead of next week’s policy decision.

Delay in US-China deal….

During the week, there were reports that a potential US-China trade deal would be delayed until April which curbed risk appetite to some extent.

… but a turning point for the global economy?

The latest Chinese industrial growth data was weaker than expected with a slide to 17-year lows. China, however, pledged further tax cuts to boost demand and reiterated that interest rates could be cut further.

With global central banks taking a dovish stance, there was speculation that the global economy would stabilise later in 2019.

In this environment, there was a decline in demand for the Japanese yen as defensive yen faded and the dollar also lost support.


Domestic data releases remained were slightly stronger than expected with a recovery in industrial production and GDP data for January. The Chancellor was also able to revise borrowing forecasts lower despite a cut to the GDP growth forecast.

Economic events were, however, overshadowed by politics with extreme drama and tensions within parliament.

On Monday, Prime Minister May travelled to Brussels following reports of last-minute concessions by the EU ahead of Tuesday’s Brexit vote.

Stronger reassurances over the Northern Ireland backstop triggered expectations that the Withdrawal Agreement could be approved and Sterling surged. The official legal advice, however, was not changed which pushed the currency sharply lower once again as opposition to the deal hardened once again.

The crucial vote was again lost but close to 150 votes, but Sterling was resilient and made fresh gains late in the week as parliament voted that a ‘no-deal’ outcome should be ruled out in all circumstances.

The House of Commons also voted in favour of an extension to Article 50, but May suggested that another failure to approve the deal would result in a long extension which increased pressure for the deal to be approved as failure would increase the risk of Brexit not happening at all.


The latest Euro-zone data was slightly stronger than consensus forecasts with helped stabilise sentiment with markets also optimistic that a no-deal Brexit outcome would be rejected.


The Bank of Japan made no changes to monetary policy at its latest meeting, but downgraded the economic outlook.

Oil prices strengthened to 4-month highs with support from on-going disruptions to supply from Venezuela and Iran and higher prices supported the Canadian dollar.

Next Week’s Forecast & Events

a Men Looking at Economic Forecast


The Philly Fed manufacturing survey is due on Thursday and will have some impact on sentiment, although the data will need to be substantially away from expectations to have a major impact. PMI business sentiment data is due on Friday.

The Federal Reserve meeting will tend to dominate during the week even though there is no real chance of a change in interest rates.

The statement will be important as evidence of underlying confidence in the economy and potential interest rate changes later in the year.

The latest interest rate projections will also be an important market focus and the dollar may gain some support if the individual projections still indicate that rates are likely to increase this year.

Fed Chair Powell will hold a press conference following the meeting and he is likely to reiterate a patient stance.


There are important data releases during the week, although the impact is again likely to be overshadowed by political developments.

The latest labour-market data is due for release on Tuesday with expectations of a firm average earnings release. The consumer prices data is due on Wednesday followed by the retail sales release on Thursday.

The Bank of England will announce its latest policy decision on Thursday, but the Monetary Policy Committee will again be severely constrained by political considerations with no change in policy and only measured rhetoric on the outlook until Brexit uncertainty is resolved. The bank is liable to lower its growth forecasts, but may point to a tight labour market and higher wages.

There will certainly be no escape from politics with further high drama surrounding Brexit.

At this stage, parliament is due to hold a third vote on the Withdrawal Agreement on Tuesday, but the timetable is liable to change, especially if the vote will only be held if the government thinks there is a good chance of a victory.

The EU attitude will also be important with the potential for dramatic events at Thursday’s EU leaders’ economic Summit regardless of the UK vote. The 27 countries will probably have to debate whether to approve a Brexit extension request.


The Markit data for Euro-zone March business confidence data is due on Friday. This release will be important for market sentiment on the Euro-zone economy. Last month there was further vulnerability within the manufacturing sector and a stronger services tone. Stronger manufacturing data would be important in improving sentiment towards the Euro-zone outlook.


The Swiss National Bank will hold its latest quarterly meeting with markets expecting rates to be held at -0.75%.

Canadian inflation and retail sales data is due on Friday.

China will remain in focus

Trade developments will continue to be important with the Australian and Canadian dollars gaining support if there are expectations that a deal will be approved.

Currency Forecast for Next Week

Currency pairSpot 1-week forecast1-month forecast
 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 

Information expressed in this article and on as a whole does not constitute as financial advice. If you decide to make any actions based on the information you read, we shall not be held responsible.


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